SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                 For the quarterly period ended: March 31, 1999

                        Commission File number: 0-114244

                                 WATCHOUT! INC.
             (Exact name of registrant as specified in its charter)

Utah                                                     84-0959153
State or Other Jurisdiction                              (I.R.S. Employer
of incorporation or organization)                        Identification Number)

116 Stanyan, San Francisco, California            94118
(Address of principal Executive Offices           Zip Code)

Registrant's telephone number, including area code: 415-387-3135

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for at least the past 90 days.

                                Yes  X       No   ____

As of March 31, 1999, there were 15,030,245  outstanding shares of common stock,
par value $.0001.


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<TABLE>
<CAPTION>



PART 1.           FINANCIAL INFORMATION

         ITEM 1.           Financial Statements

                                                           WATCHOUT! INC.
                                                            Balance Sheet
                                                             (Unaudited)


ASSETS                                                        March 31, 1999              December 31, 1998
                                                              --------------------------- ----------------------------
<S>                                                           <C>                         <C>
Current Assets
Cash                                                          0                           580
Accounts Receivable                                           0                           -
Less Allowance for Doubtful Accounts                          0                           -
                                                              --------------------------- ----------------------------
                                                                                          580
Inventory                                                     0                           -
Total Current Assets                                          0                           580
Property, Plant and Equipment                                 0                           -
Less Accumulated Depreciation                                 0                           -
                                                              --------------------------- ----------------------------
Total Property and Equipment                                  0                           -
Other Assets
Due from member                                               0                           -
Organization Costs                                            15,250                      15,250
Less Accumulated Amortization                                 (3,812)                     (3,050)
                                                              --------------------------- ----------------------------
Total Other Assets                                            11,437                      12,200
                                                              --------------------------- ----------------------------
TOTAL ASSETS                                                  11,437                      12,780
                                                              =========================== ============================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accrued Expenses                                              537,213                     537,213
Accounts Payable                                              475,989                     475,989
Due to Stockholders                                           457,945                     457,945
Due to Factor                                                 0                           -
Line of Credit                                                0                           -
Notes Payable                                                 450,000                     450,000
                                                              --------------------------- ----------------------------
Total Current Liabilities                                     1,921,147                   1921,147
Stockholders' Equity (Deficit)
Preferred Stock, no par value 10,000,000 shares authorized, no
shares issued or outstanding
                                                              0                           -
Common Stock, $.001 par value, 50,000,000 shares authorized,
15,030,245 shares issued and outstanding
                                                              15,030                      15,030
Additional Paid in Capital                                    989,502                     989,502
Accumulated Deficit                                           (2,914,241)                 (2,914,241)
                                                              --------------------------- ----------------------------
Total Stockholders' Deficit                                   (1,909,709)                 (1,908,367)
                                                              --------------------------- ----------------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
                                                              11,437                      12,780
                                                              =========================== ============================

</TABLE>

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<TABLE>
<CAPTION>


                                                           WATCHOUT! INC.
                                            Consolidated Statement of Income and Expense
                                                            (Unaudited)
                                                For the three months ended March 31,



                                                                      1999                           1998
                                                          ----------------------------  ------------------------------
<S>                                                                         <C>                             <C>
OPERATING REVENUES
Revenues                                                                             0                        $198,397
Cost of goods sold                                                                   0                          22,972
                                                          ----------------------------  ------------------------------

Gross profit                                                                         0                         175,426

OPERATING EXPENSES
Royalties                                                                            0                               -
Research & development                                                               0                          23,955
Selling expenses                                                                     0                          27,479
Professional fees                                                                    0                          20,561
General & Administrative                                                           580                           6,937
Marketing                                                                            0                           1,250
Commitment/Loan Fees                                                                 0                               -
                                                          ----------------------------  ------------------------------

Total operating expense                                                            580                          80,182
                                                          ----------------------------  ------------------------------

OPERATING PROFIT (LOSS)                                                          (580)                          95,244

OTHER (REVENUES) & EXPENSES
Interest expense                                                                13,500                           4,268
Miscellaneous income                                                                 0                         (1,691)
Loss on sale of receivables                                                          0                         138,528
                                                          ----------------------------  ------------------------------
Total other revenues & expenses                                                 13,500                         141,105

NET INCOME (LOSS)                                                             (14,080)                        (45,861)
                                                          ============================  ==============================

LOSS PER SHARE
Primary                                                                         (0.00)                          (0.00)

Weighted number of shares outstanding                                       15,030,245                      15,030,245


</TABLE>

     The accompanying notes are an integral part of this financial statement



<PAGE>

<TABLE>
<CAPTION>


                                                           WATCHOUT! INC.
                                                Consolidated Statement of Cash Flows
                                                            (Unaudited)
                                                            Quarter Ended
                                                              March 31


                                                                         1999                         1998
                                                             ---------------------------- ----------------------------
<S>                                                                              <C>                          <C>
Cash flows from Operating Activities

Net income (loss)                                                                   (580)                     (45,861)

Depreciation & amortization
(Increase) decrease in Accounts Receivable                                              0                     (40,503)
(Increase) decrease in Inventory                                                        0                            0
(Decrease) increase in Accrued Expenses                                                 0                        (157)
(Decrease) increase in Accounts Payable                                                 0                       11,588
(Decrease) increase in Interest Payable                                            13,500                      (2,663)

Net cash flows used for Operating Activities                                     (14,080)                     (77,596)

Cash flows from investing activities
(Purchase) sale of Fixed Assets                                                         0                     (12,954)
(Purchase) sale of Other Assets                                                         0                       50,889
                                                             ---------------------------- ----------------------------
Total cash used for investing                                                           0                       37,935

Cash flows from financing activities
(Decrease) increase in Due to Stockholders                                              0                        9,000
(Decrease) increase in Due to Member                                                    0                     (11,188)
(Decrease) increase in Line of Credit                                                   0                     (11,591)
(Decrease) increase in Notes Payable                                                    0                            0
Additional capital invested                                                             0                            0
                                                             ---------------------------- ----------------------------

Total cash from financing activities                                                    0                     (13,779)

Increase (Decrease) in cash                                                         (580)                     (53,440)
                                                             ---------------------------- ----------------------------

Cash and cash equivalents - beginning of period                                       580                       59,147
                                                             ---------------------------- ----------------------------

Cash and cash equivalents - end of period                                               0                        5,707
                                                             ============================ ============================


</TABLE>


     The accompanying notes are an integral part of this financial statement


<PAGE>



WATCHOUT! INC.
NOTES TO FINANCIAL STATEMENTS


1. Organization and Summary of Significant Accounting Policies:

Organization-  White Cloud  Exploration,  Inc. (the Company) was incorporated in
the State of Utah on July 22, 1983, for the purpose of obtaining capital to seek
potentially profitable business opportunities.  Since inception, the Company has
been engaged in  organizational  activities.  The Company acquired two entities,
Watchout,  a California  Corporation,  and  Goldpoint  International,  a limited
liability company. White Cloud Exploration,  Inc. changed its year-end from June
30 to December 31. The Company changed its name to WatchOut! Inc. on November 9,
1998.

The Company has ceased all business activities due to lack of operating capital.

2. General and Summary of Significant Accounting Policies

Property and Equipment- Property and equipment are stated at cost.  Depreciation
is computed using the  double-declining  balance  method over  estimated  useful
lives of 5 years.

Other Assets- Other assets consists of organizational costs and trademarks which
have been capitalized and are being amortized over 5 and 40 years, respectively,
using the straight-line method.

Research and  Development-  Research  and  development  costs are expensed  when
incurred.

Uses of Estimates- The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the reported  activities  during the  reporting  period.  Actual
results may differ from those estimates.


3. Related Party Transactions

Watchout   has   recorded   unsecured,   non-interest-bearing   amounts  due  to
stockholders for the reimbursement of expenses.  There are no specific repayment
terms; however,  these amounts are expected to be repaid within 12 months of the
balance sheet date.

Watchout has also recorded $457,945 in amounts due to stockholders.  The amounts
are payable on demand at an interest rate of 5.81%.


4. Changes in Control



5. Commitments and Contingencies

License  Agreement-  On  September  21,  1995  Watchout  entered  into a license
agreement  with an  unrelated  third party for the use of patents and  technical
knowledge.  The agreement provides for minimum payments for the first four years
through September 1999, totaling $915,000, which may be offset by the payment of
royalties as a percentage  of sales.  The agreement may be canceled at any time,
without cause, by Watchout,  with 60 days notice and with no further  liability.
In addition to expense reimbursements of $20,000,minimum  payments in the amount
of $225,000 and $296,250 have been made for 1997 and 1996, respectively, and are
reported as royalties in the accompanying Statement of Operations. The Agreement
is in default and is in litigation.

Investment  by   Distribution-   Watchout  entered  into  an  agreement  with  a
distributor on July 21, 1996. The agreement provides that the distributor invest
$500,000 -  $250,000  as a cash  payment to  Watchout  and  $250,000  to be made
available to Watchout for use in Hong Kong, oversees production, quality



<PAGE>



WATCHOUT! INC.
NOTES TO FINANCIAL STATEMENTS


assurance/quality  control and establish a $150,000 standby letter of credit. In
exchange, Watchout will issue the distributor 4% of the common stock outstanding
as of the date of the  agreement,  grant  distribution  rights in Southeast Asia
(except  Japan),  pay 9%  commission  based on the  factory  store  costs of the
product,  and grant the right to open Watchout retail stores in all of Southeast
Asia.  The agreement  will remain in effect for a minimum of four years or until
the distributor's investment of $500,000 is earned through commissions.

Placement  Agreement-  On February 5, 1997,  Watchout  entered into an agreement
with a placement agent to secure additional  capital or financing in the minimum
amount of $6,000,000.  The agreement requires Watchout to pay commissions to the
placement agent equal to 10% of the additional capital or financing received and
a  non-accountable  expense  allowance equal to 3% of the additional  capital or
financing.  In addition,  Watchout is partially responsible for certain expenses
incurred by the placement agent upon closing.  In 1996,  commitment fees paid to
the placement  agent  amounted to $20,000.  No fees were paid in 1997 under this
agreement.

As a condition of the agreement, the placement agent reserved the right of first
refusal to  underwrite  or place any future  public or private  sales of debt or
equity   securities  of  Watchout,   including  those  involving  any  principal
stockholders of the Watchout through November 19, 1999.

Watchout  has also agreed to pay the  placement  agent a 5% finder's  fee in the
event that they are party to any merger, acquisition or joint venture introduced
directly or indirectly by the placement agent.

In  connection  with the  placement  agreement,  the Board of  Directors  issued
3,639,925 shares of common stock to the placement agent for $500. The shares may
be repurchased  on a pro rata basis if $6,000,000 is not raised  pursuant to the
terms of the aforementioned agreement.

Stock Warrants- In connection with the loan agreements dated September 19, 1997,
Watchout  agreed to pay finder's fees to a third party.  The agreement  requires
payment of finder's  fees in the form of $32,500 at the closing of the loans and
250,000  stock  warrants  with an  exercise  price of $.10 a share  expiring  on
December  19,  2000.  Payment of the  finder's  fees had not been made as of the
balance  sheet date,  however,  the $32,500 fee has been accrued at December 31,
1997. The warrants are to be issued when and if the private placement  described
previously under Placement Agreement is consummated.

In connection with the loans arranged for by Sands Brothers & Co., Ltd.  ("Sands
Brothers"),  White  Cloud  Exploration  has agreed to issue  stock  warrants  to
Raymond J. Larkin,  Watchout-Goldpoint  Partners,  L.P., Sands Brothers and Mark
Hollo totaling 75,000, 225,000,  25,000 and 25,000 shares respectively,  with an
exercise price of $.01 a share, expiring on September 3, 2000.

6. Line of Credit

A  promissory  note to  Goldpoint  International,  LLC of $54,968  payable  with
interest  60 days  from the date of each cash  advance  under a letter of credit
issued by Opal  Trade  Corporation.  Interest  accrues  at a rate of 4% over the
prime rate  designated  by Chemical  Bank.  This note is  collateralized  by the
assets of the company.

7. Loan Payable

( a ) Two 18%  promissory  notes of $150,000 and $50,000 due  September 3, 1998.
These notes are considered Senior and have priority in right of payment over all
indebtedness of the company.

( b ) A 12% promissory note of $166,000  payable to John Bader in one payment of
principal  and  interest  due on  demand  or at the time of first  funding  of a
private  placement of stock in the amount of  $6,000,000  by Watchout.  All sums
past due  shall  bear  interest  at 18% from  their  maturity  date.  Collateral
security includes the first $1.32 per unit production  proceeds upon the sale of
certain products.



<PAGE>



WATCHOUT! INC.
NOTES TO FINANCIAL STATEMENTS


( c ) A 12% promissory  note of $84,000 payable to Wayne Williams in one payment
of principal  and  interest  due on demand or at the time of first  funding of a
private  placement of stock in the amount of  $6,000,000  by Watchout.  All sums
past due  shall  bear  interest  at 18% from  their  maturity  date.  Collateral
security includes  priority  assignment of contract rights to the next $0.68 per
unit in production proceeds,  second only to the $1.32 per unit assigned to John
Bader from proceeds from certain products.


8. Going Concern

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
company as a going  concern.  However  the  company  has  sustained  substantial
operating losses in recent years. In addition,  the company has used substantial
amounts of working capital in its operations. Further, at March 31, 1999 current
liabilities  exceed current assets by $1,921,147,  and total liabilities  exceed
total assets by $1,909,710.

In view of these  matters,  realization  of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations  of the
company,  which in turn is  dependent  upon the  company's  ability  to meet its
financing  requirements,  and the success of its future  operations.  Management
believes that actions  presently  being taken to revise the company's  operating
and financial  requirements  provide the opportunity for the company to continue
as a going concern.




<PAGE>



ITEM 2.

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

Results of Operations for the Quarter in 1999 Compared to Same Quarter in 1998

         The Company had no revenue and no  operations  in the first  quarter of
1999. On a consolidated  basis, after the acquisition of Goldpoint and Watchout!
subsidiaries, the Company had revenues in the first quarter of 1998 of $198,397.
The cost of goods sold in the three  month  period was none in 1999  compared to
1998  which  cost of goods was  $22,572.  The gross  (loss)  profit for the 1998
period was $0 compared to ($175,426) for the 1999 period.

         The Company incurred  operating  expenses for the three month period of
$580 in 1999  compared  to  $80,182  in the same  period in 19987.  The  Company
recorded a net  operating  loss of ($580) for the 1999  period as  compared to a
$95,244 operating profit for the same period in fiscal year 1998. The net income
(loss) for the 3 month  period in 1999 was  ($14,080)  compared to  ($45,861) in
1998.  1999 quarter losses were  attributable to interest  accrual.  The Company
losses  will  continue  until a business  is  recommended.  While the Company is
seeking  capital  sources for  investment,  there is no  assurance  that capital
sources can be found.  The loss per share for the 1999 first quarter was nominal
compared to a nominal loss in the first quarter of 1998

Liquidity and Capital Resources

         The Company had no cash  capital at the end of the period.  The Company
will be forced to make private  placements of stock in order to fund  operations
continuance. No assurance exists as to the ability to make private placements of
stock.  It had no accounts  receivable or assets at quarter end. The Company has
significant  current  liabilities  to lenders  which  exceed  current  assets by
approximately  $1,921,147.  The Company is in default on notes in the amounts of
$450,000, although no demand for payment has been issued.


PART II
                                  OTHER INFORMATION

Item 1.           Legal Proceedings - None.

Item 2.           Changes in securities - None.

Item 3.           Defaults upon senior securities - None.

Item 4.           Submission of matters to a vote of security holders - None.

Item 5.           Other information - None.

Item 6.           Exhibits and reports on Form 8-K

                  (a)      The following are filed as Exhibits to this Quarterly
                           Report.  The numbers  refer to the  Exhibit  Table of
                           Item 601 of Regulation S-K:

                                    None.

                  (b)      Reports  on Form 8-K filed  during  the three  months
                           ended March 31, 1999. (incorporated by reference)

                                    None.



<PAGE>


                                   Signatures

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf of the
undersigned thereunto duly authorized.


Dated: November 7, 1999

                                             WATCHOUT! INC.


                                                 /s/ Kevin Waltzer
                                             by:--------------------------------
                                                 President